"Known simply as Mr. Wu by those who know him, this man is the Chinese version of a great American success story. 35 years ago, Mr. Wu was the head engineer in the People's Republic of China for a government agency responsible for creating industrial efficiency technologies. 15 years ago Mr. Wu's agency was converted into a government owned business developing waste/heat recovery systems called China Energy Recovery. In the 90's the Chinese government began to allow the privatization of government owned businesses, and in 1995 Mr. Wu privatized China Energy Recovery, which he financed with a $5,000 charge on his credit card. At the time he had 12 engineers and a COO, all of whom still work at the company.
Despite being the CEO of China Energy Recovery on track to generate over $20 million in revenues this year, Mr. Wu still lives in a modest middle class apartment in Beijing and takes an annual salary of about $5,000- 20% more than the mean white collar annual salary of about $4,000 in Beijing. Today, China Energy Recovery has 80 full time engineers on staff, and will be expanding that number to 120 to 150 full time engineers by the end of 2009 to meet the accelerating demand for their systems.
This publication is the first real coverage of China Energy Recovery offered by anyone, and you have the first look opportunity. If you like this company and you want to invest, consider your own investing strategies. You need to figure out the best one for you, and stick with your discipline, but in my opinion CGYV is worth at least 70% of the value of (NASDAQ: ERII), Energy Recovery Systems went public in July of this year and it was one of the few successful IPOs in 2008. The market says ERII is worth $330 million- CGYV would be worth $231 million- divided by 30 million I&O - you have a stock in theory worth $7.70 per share. ERII is a little bigger, but CGYV is growing about 4 times as fast and has 36% fewer shares I&O."
I was in Europe for 2 weeks and fell a bit behind on my correspondence and blogging. When I returned I spent some time plowing through emails and BLOG comments, and was both surprised and entertained by the reaction of some investors to CGYV’s recent pull back to the low print of $1.50. Pretty funny stuff. This formerly hot China stock has cooled off considerably.
For those who are interested, you might want to check out this Bloomberg interview with the investment banker who financed the company. Click here to view the video. It was a pre Asian market open on Thursday, the 11th.
I don’t know why the stock pulled back like it did. I suspect it had a lot to do with a delayed reaction to Q1 numbers, which were admittedly abysmal.
One might easily believe the company, after three consecutive years of double digit growth, had fallen on hard times after looking at the Q1 numbers. After all, the company only delivered $1.5 million in revs in Q1- not much relative to expectations of more than $30 million this year.
This is of little or no concern for those who understand this company’s business model. It’s not the kind of company that delivers consistent daily sales. It’s a large project oriented company, that does a lot of work in house before delivering. Then, they get to book about 90% of the revenues. The rest comes over time.
The company delivered on a rather large project the first week of April which they had hoped and planned to deliver on in late March, so a big swack of revs won’t book until Q2, which should be a good quarter.
In the interim, I find it interesting that none of the whiners about this stock are making much of the $5 million financing the company closed. This was a convertible security, with a 9% coupon, that converts at a non adjustable conversion price of $1.80.
Consider what this means. This is a Hong Kong based fund. Their analysts went directly to the company and performed extensive due diligence. They came away with the impression they could make a significant return on their investment from $1.80 per share in CGYV. True, they get 9% while they wait, but if you wanted to put up $5 million, you might be able to get the same.
That’s the first thing. Second, and perhaps far more intriguing- what are they going to do with the money they raised? After all, if you look at the Q1 balance sheet, you don’t see any need for the cash- at the end of March they had $4 million in cash, $4.75 million in receivables, and $9 million in inventories against $2.9 million in payables- that’s pretty strong. "
This was posted about 12 months ago, and may be relevant still.
And found this:
Coverage Period: September 13, 2008 - September 13, 2009 Company Symbol: CGYV Compensation: MarketByte LLC has been paid a fee of $40,000 and 100,000 shares of China Energy Recovery for coverage of the company. TGR Group LLC, a company affiliated with MarketByte LLC, has also received $40,000 in cash and 100,000 shares of China Energy Recovery for coverage of the company. In addition, MarketByte LLC has managed a budget of approximately $500,000 for DVD production and distribution of video related to China Energy Recovery. All costs associated with the DVD production were pass through in nature, and MarketByte LLC received no profit and or additional compensation of any kind with regard to DVD production and distribution. In additions, the editor and affiliates have purchased a total of 59,840 additional shares at an average cost of $2.84 per share. The aforementioned shares may be sold at any time without notice. Transactions are disclosed an updated weekly on the web site.
Current Position as of 05/07/10: 48,023 Shares Total Dollars Liquidated as of 05/07/10: $253,162.02
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